After a years-long process to restructure the way it handles what has so far been a mostly-outsourced IT operation, the Department of the Navy has picked a team led by Hewlett Packard as the winner of its new multi-billion dollar Next Generation Enterprise Network (NGEN) contract.

In choosing HP, the Navy and Marine Corps opted to continue a long relationship with the company, which has owned and operated the two services’ networks for more than a decade under a construct called the Navy-Marine Corps Intranet (NMCI), the largest outsourced IT operation in the federal government’s history.

Under the contract officials announced Thursday evening, HP is being awarded up to $3.5 billion over five years, starting with a first-year base period worth $322 million. The contract also requires HP to subcontract at least 35 percent of its work to small businesses.

Stackley: HP should not be viewed as contract incumbent

In winning the contract, HP edged out a competing offer from a team that included CSC and Harris Corporation. But following the award announcement, Sean Stackley, the Navy’s assistant secretary for research, development and acquisition, told reporters it would be wrong to think of HP in strict terms as the incumbent in the contract. Sean Stackley, assistant secretary of the Navy for research, development and acquisition “Anybody who concludes that only the incumbent could have won this contract is using a pretty shallow analysis,” he said. “Because the incumbent here is not the incumbent. Hewlett Packard is leading a team, but it’s a different team from the NMCI team. HP reshaped itself for NGEN. It was a very tight competition, and I believe we got the very best of U.S. industry at the table for this.”

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Between the two consortia, the Navy got a total of seven offers. That’s because it asked industry to submit proposals in two separate IT categories — enterprise services and transport services. Each group offered bids in varying combinations, but the Navy ultimately picked HP for both on the basis of the terms it set out from the beginning of the source selection: lowest-price technically acceptable.

Stackley said both teams submitted offers that met the Navy’s minimum standards, and HP won strictly on the basis of price.

“The bottom line is we got what we aimed for,” he said. “We arrived at a contract award that ensures that we hold onto the security we’ve got inside NMCI, but also lets us address the future cyber threat in a rapid fashion. And we’ve now got a contractual environment that gives us far greater agility in terms of moving forward on the network.”

Infrastructure in the hands of the Navy, Marine Corps

Under NMCI, the network was owned and operated by HP. Under NGEN, the Navy and Marine Corps will own their infrastructure and the intellectual property that goes along with it. The Marine Corps will operate the network on its own with some support from the NGEN contract, while HP will handle most of the touch labor on the Navy side.

While the NMCI contract officially expired in 2010, HP has continued to operate the network since then under continuity of service agreements with the government after repeated delays to the NGEN award process.

Stackley said the process dragged out for several years because unraveling NMCI was an incredibly complicated task, since the Navy had limited visibility into how its own IT network was structured. He said one of the main benefits of NGEN will be to make future competitions easier to conduct.

“You cannot underestimate how difficult it is to make the transition from a contractor-owned, contractor-operated, 400,000 seat network, to a government-owned, hybrid network,” he said. “Now that we’re there, we have a far greater flexibility to compete services on that network.”

The Navy structured NGEN so that it’s comprised of more than three dozen defined IT “services.” HP will perform each and every one for now, but the Navy says it reserves the right to recompete any or all of them down the road if it’s unhappy with the performance of any individual part of the network.

Officials have scheduled 13 months for the transition period from NMCI to NGEN. They estimate that once the process is complete, the Navy and Marine Corps will be saving around $1 million over five years compared to its costs under the NMCI contract.

But Victor Gavin, the Navy’s program executive officer for enterprise information systems, said average users shouldn’t see any change at all during the transition.

“Our requirement, not just our goal, is that as we transition into NGEN, the process is transparent to the user base on the front end,” he said. “On the back end though, we do believe that because of the flexibility we brought into this contract, we’re going to have a much greater opportunity to transition to the latest IT technologies, and do it in a cost-wise manner. We also think we’ve postured ourselves to be aligned with the new and emerging security requirements that are going to be coming along.”

Marine Corps transitioned on June 1

For the Marine Corps, much of the hard work toward the NGEN transition is already done. The service officially transitioned on June 1 to a fully government-owned and operated network.

“I don’t think I came into work that day because it was a Sunday, but our Marines really didn’t see any difference,” said Brig. Gen. Kevin Nally, the Marine Corps’ chief information officer. “The only difference we’ve seen is that instead of dialing a 1-800 number for help, we send Marines or civilians or HP people to put eyes on the problem and see if we can fix it. The commandant’s guidance to me several years ago was that he wanted every Marine to have the same service he personally gets. The perception throughout the Marine Corps is that’s now starting to happen.”

For the Navy, contractors will handle routine maintenance functions on the network, but high-level command and control decisions will be made by the Navy’s Fleet Cyber Command.

“Brig. Gen. Nally has already made a tremendous transition. The Navy now has to take some of the processes and workforce we’ve put in place and take over some of the command and control responsibilities,” said Rear Adm. Diane Webber, Fleet Cyber Command’s deputy commander. “We hope we’ve adopted a ‘rip-the-Band-Aid-off’ approach so that we can get through it as quickly as possible so that we can move on to day-to-day operations, not in a transition state, and then begin to look at where we go next.”

On DoD focuses on the programs and policies that affect the Defense Department. Each week, Defense Reporter Jared Serbu speaks one-on-one and in depth with the people responsible for managing the inner workings of the federal government's largest department, and those who know it best.